TEXT-S&P: North Africa to witness gradual growth in Islamic banking
Sept 27 - Supportive socio-political factors and economic incentives should accelerate the growth of Islamic banking activities in North Africa from current low levels, according to a new report published by Standard & Poor's Ratings Services titled "Prospects For Islamic Banking In North Africa Improve Following The Arab Spring." Islamic banking started to emerge in North Africa in the 1970s when Egypt was among the first countries in the Arab world to authorize the establishment of pioneer Islamic banks. However, the sector is still branded as a niche market in the region, with an overall market share well below 5% of total banking assets. We think the change in political landscape following the Arab Spring should rekindle the development of Islamic banking in the region. In the meantime, we see financial incentives for developing Islamic banking in the region. An increase in Islamic banking activities should help alleviate some financial pressures that North African countries currently face. For instance, it could promote banking penetration and intermediation, and broaden access to funding sources for banks, corporates, and sovereigns. That said, we believe progress may only be gradual, taking at least two to three years before market penetration markedly improves. This is because these activities require a solid foundation to develop successfully, namely a stable political environment, clearly defined legal and supervisory frameworks, and marketing initiatives to attract and retain customers. Still, we believe that North African regulators and product developers should be able to build on the development of this field in other parts of the world. Assuming that imported solutions are endorsed by local Sharia scholars, this cross-fertilization should help the Islamic banking industry become more sophisticated and integrated globally. The report is available to subscribers of RatingsDirect on the Global Credit Portal at www.globalcreditportal.com. If you are not a RatingsDirect subscriber, you may purchase a copy of the report by calling (1) 212-438-7280 or sending an e-mail to email@example.com. Ratings information can also be found on Standard & Poor's public Web site by using the Ratings search box located in the left column at www.standardandpoors.com.
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